3 Must Read Stories: Crunch Time for MSCI on China, China Hits Peak Pork, and Aussie Banks In Spotlight

Investors will learn overnight whether index compiler MSCI will include China A-shares in its closely followed indices.

Bloomberg has an interesting story looking at the decision and whether it really matters given traders are more focused on the rally on Wall Street and the gains made by U.S.-listed Chinese stocks. Here's some of the detail:

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China’s fourth attempt at cracking into MSCI Inc.’s benchmark share indexes comes with its best chance of success -- and the least at stake.

In what’s become an annual event, MSCI will announce early Wednesday morning Hong Kong time whether China’s domestic stocks have won inclusion. Previous efforts have foundered on concern over repatriation limits and excessive trading suspensions, obstacles the index compiler has sought to overcome with a less ambitious proposal.

While the decision still holds weight for investors, the swings of the nation’s $6.8 trillion equity market are losing relevance for traders in London and New York more attuned to a global technology rally and signals from the Federal Reserve. Even if yuan-denominated shares are added, they would be dwarfed by overseas-listed Chinese stocks, which have an increasing sway over MSCI’s developing nation gauge.

For pig farmers in China and abroad, it is a difficult trend to stomach. The producers and other market experts had expected the growth to continue until at least 2026.

Chinese hog farmers are on a building spree, constructing huge modern farms to capture a bigger share of the world's biggest pork market, while leading producers overseas have been changing the way they raise their pigs to meet Chinese standards for imports. Some have, for example, stopped using growth hormones banned in China.

China still consumes a lot more meat than any other country. People here will eat about 74 million tonnes of pork, beef and poultry this year, around twice as much as the United States, according to U.S. agriculture department estimates. More than half of that is pork and for foreign producers it has been a big growth market, especially for Western-style packaged meats.

But pork demand has hit a ceiling, well ahead of most official forecasts. Sales of pork have now fallen for the past three years, according to data from research firm Euromonitor. Last year they hit three-year lows of 40.85 million tonnes from 42.49 million tonnes in 2014, and Euromonitor predicts they will also fall slightly in 2017.

Australian banks have been in the spotlight for a while given concerns about their exposure to frothy property prices in key markets like Sydney and Melbourne. The banks' asset quality will come into sharpened focus after Moody's Investors Service cut its ratings on the largest banks Down Under. Bloomberghas the details:

The decision by Moody’s Investors Service to downgrade the ratings of Australia’s largest banks has focused attention on the risks lurking in the country’s A$1.51 trillion ($1.15 trillion) of mortgage loans.

“The resilience of household balance sheets and, consequently, bank portfolios to a serious economic downturn has not been tested at these levels of private sector indebtedness,” Moody’s said in the statement accompanying the downgrade of Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd. and Westpac Banking Corp.

The banks are already bracing themselves for an announcement in coming days from the Australian Prudential Regulatory Authority, which is due to say whether it will require the banks to hold more capital against their mortgage books as part of a wider update on capital requirements. Despite recent steps to rein in their exposure to the riskier areas of mortgage lending, the lenders still sit on by far the largest property lending books of any banks in the world, measured as a proportion of total loans.

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